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The value of a dollar in each state

24/7 Wall St. logo 24/7 Wall St. 5/18/2017 Steven Peters

Click through the gallery above to see the value of a dollar in each state.

The value of a dollar is not the same everywhere. Prices even of identical items vary dramatically depending on where they are sold.

The Bureau of Economic Analysis calculates regional price parities -- differences in the price levels of goods and services -- in each state. Using this data from the BEA, 24/7 Wall St. reviewed the value of a dollar in every state.

The value of a dollar goes up in places where goods and services are less expensive. Areas with low costs of living tend to be in southern states or in areas where incomes are generally lower. By contrast, the most expensive states -- where your dollar is worth the least -- tend to be home to some of the nation’s largest urban clusters.

While the price of many goods and services varies across the country, much of the differences in cost of living between states are the result of differences in housing costs. For example, with such high rental and housing prices in Hawaii, a dollar retains only 63 cents of its average value when spent on rent in the state. A dollar spent on rent in Arkansas on the other hand is essentially worth $1.60.

States with large shares of residents living in expensive housing in urban areas account for the vast majority of states where a dollar is worth the least. A dollar tends to be worth much more in states, particularly in the South, where a much smaller share of residents lives in cities.

Businesses that sell consumer goods in dense urban areas often have to pay a higher rent than businesses in rural areas. Some of the extra expense in the urban areas is passed on to customers by charging higher prices.

Related video: These states have the highest cost of living in the US (provided by CNBC)

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In states where a dollar is worth less -- that is, states with the highest cost of living -- residents tend to have higher incomes. While New York state residents only see $0.86 of value from each dollar spent, the annual per capita income is also $10,000 higher, more than enough to offset the lower purchasing power.

Incomes vary more between states than the value of a dollar. For this reason, in most of the states with high incomes and higher prices, residents are still able to afford more than residents of states with lower incomes and cheaper prices.

While the states with the highest incomes tend to be relatively expensive places to live, this is not always the case. There are six states where the per capita income is higher than average, and the cost of living is less than the average nationwide. Notably, when per capita personal income is adjusted to the cost of living, North Dakota is the state with the highest per capita personal income.

To determine the value of a dollar in every state, 24/7 Wall St. reviewed the 2014 regional price parity -- the most recent year for which data is available -- for every state with data from the Bureau of Economic Analysis. 2014 per capita personal income also came from the BEA. Effective personal income was calculated by dividing the 2014 per capita personal income by the 2014 regional price parity. Median home values came from the 2015 U.S. Census Bureau’s American Consumer Survey.

Click through the gallery at the top of the page to see the value of a dollar in each state.


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